Following the approval of the so-called consolidation package, it is necessary to prepare for extensive changes in the area of tax laws and accounting.
VAT
There will be two new VAT rates, 12 and 21 percent. Foodstuffs will remain at the lower rate, while selected services will be transferred to the higher rate. Printed newspapers will be taxed at 12 per cent VAT, as will magazines. Menstrual supplies, firewood, diapers, baby water, mineral water, etc. will remain at the 21% VAT rate, while hairdressers' or authors' and artists' services will now be included. Books are included in the zero rate of VAT. So it can be said that the three VAT rates have remained. There is one reduced rate instead of two, but a zero rate has been added.
The entry price limit for the application of VAT on passenger cars will be 2 mill. CZK (max. CZK 420 thousand).
Real estate tax
This tax will increase by an average of 1.8 times. The municipalities are given the power to introduce a local coefficient of 0.5 for agricultural land, which will preserve the tax on this land. There will be an automatic indexation of the tax according to the inflation rate in a given year.
Act on Accounting
Companies will be able to keep their accounts in a foreign currency - EUR, USD or GBP. This option is introduced for companies that have most of their transactions in a given foreign currency. Big changes in accounting are yet to come. Czech double entry accounting will continue to move closer to IFRS.
Income tax
The corporate income tax rate increased from 19 to 21 percent.
The threshold for the application of the 23% rate of VAT has been reduced from 48 times the average wage to 36 times the average wage.
Extraordinary depreciation for cars purchased after 1 January 2024 will be applied to so-called emission-free vehicles (electric cars). The entry price of a passenger vehicle for tax deductibility of depreciation will be CZK 2 million.
At the end of the period, unrealised foreign exchange gains or losses may be recognised as a non-tax expense or income (relates to open foreign currency receivables and payables with a balance at 31 December). This is subject to notification to the tax authorities.
We also have a new limit for the exemption of income from the sale of a security or share in a company if the time test of three years or five years between the acquisition and sale is met, namely CZK 40 million.
Within the personal income tax, the conditions for the application of the spouse discount, the abolition of school fees and the student discount will also be modified.
When calculating employees' wages, the payroll accountant must now take into account the abolition of the exemption for non-monetary benefits (a limit is introduced which is linked to half of the average wage, after exceeding the limit the benefit must be taxed, including deductions) and the abolition of the exemption for excess meal vouchers.
Social and health insurance
In 2024, there will be an increase in the rate of sickness insurance for employees , reintroducing sickness insurance for employees at a reduced rate of 0.6 per cent.
In the case of self-employed persons, social and health insurance will then be calculated as 55% of the tax base of the income tax of the self-employed person, whereas until 2023 it was only 50%.
Extensive changes are also being made to the popular performance agreements. These changes are set out in the next article on our website.
So let's see if these changes help kick-start economic growth